Red River - Current market cap 120m.
*disclaimer - still new to mining and don't understand everything yet.
Executive Summary
Red River is a small, miner, developer, and explorer. They seem to have picked up a number of (distressed or end of life???) assets cheaply and are making a small mining operation out of these. They hold assets with resources in Silver, Gold, Indium, Antimony, Copper, Lead, and Zinc.
Not posting a valuation as I'm not confident enough. This company seems like a bit of a bet on how long they can keep Thalanga running and continue adding value to their projects. They are quite excited by the Antimony reserves they have at the moment. To give a very highly questionable ballpark of what the company might be worth, if they were to achieve 38.5 mil profit (thinking potentially 35 mil for Thalanga and 3.5 mil for Hillgrove) for 4 years plus 18.5 mil for the next 6 at a dcr of 10% gives a market cap of 170 mil.
I'm not quite sure how to treat their "42 mil underlying ebitda and whether that is a realistic figure for coming profit." I do think there's the potential for a lot of upside here with the exploration happening.
Worth noting the current excellent zinc and copper prices.
In 20/21 their revenue split was (almost all from thalanga).
Zinc - $42.9 mil
Lead - $10.1mil
Copper - $38.6 mil
Gold - $10.1 mil
Silver - $16.6 mil
More detail in forum post.
Thalanga
Their main project. Facility is designed for 650ktpa throughput, not sure if operating at capacity. They seem to have reserves for around one more year of production, but have been drilling to replace this and there are further resources listed. They have had recent drilling success at Liontown. In the last year they have managed to replace reserves used, so I would expect them to do that this year, but I am not sure how many years they can do this for. See page 12 - https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02413054-3A574068?access_token=83ff96335c2d45a094df02a206a39ff4
Hillgrove (listed as 250ktpa capacity)
It seems they are just starting to put Hillgrove into production. The resource is apparently 1 mil oz au and 90kt of antimony.
In Q4 FY21 Hillgrove produced 1521 oz of gold. Multiply this by 4 for 4.5k per year, and by 1600aud (est. sale price for gold concentrates) - comes out to potentially 7.25 mil annual revenue. The grade, however, was only about ~1.5ish, while the Hillgrove 2012 JORC resource is 7.23mt @ 4.5g/t au, which suggests this might have the potential to increase profits with better grades.
With a resource of 1 mil oz it also suggests there might be the potential to upgrade the plant to increase production.
Herberton (Silver, Indium, Copper, Lead, Zinc)
This is a Silver-Indium.
Page 12 of Annual report indicates that Thalanga is replacing the ore processed with ore mined of similar grade - https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02413054-3A574068?access_token=83ff96335c2d45a094df02a206a39ff4
Thanlanga has a total resource of 6233 kt @ 13.8% zn equiv.
Out of this, 721t of this are listed as reserves @11.4 Zn equiv.
Internal Ownership
Directors and key personnel seem to own a solid number of shares, but there have not been many on market purchases in the last year, so I am unsure how these were all acquired, possibly performance.
Balance Sheet
Balance sheet looks quite good. 19 mil in cash, 10 mil in trade and inventories, 114 non-current. Liabilities are 36 mil current and 18mil non-current.
Profit and Loss
This makes interesting reading. On paper they had a NPAT of 5.899 mil. This includes a 1 off payment to settle a royalty dispute of 15 mil. Thus excluding that 15 mil, the company says there is an EBITDA of 42.7 mil and an underlying NPAT of 21mil. I don’t fully understand this balance sheet myself.
Questions
Is the royalty problem fully resolved yet?
Can reserves continue to be replaced at Thalanga?
What is the expectation of grade and profit from the Hillgrove operation?
How should I think about Depreciation and Amortisation with mining operations? I mostly need to exclude it, but keep in mind maintenance costs and the tax impact right?